What Is a Credit Report and How to Interpret It

Your credit report is a significant financial document and a detailed record of your financial history. It includes information about your credit cards, loans, outstanding debts, and payment habits. 

Beyond understanding your credit report, it’s important to know how to read a credit report so that you understand how lenders, landlords, and employers evaluate your financial responsibility. Your credit report has a direct impact on your credit score, which influences whether you are approved for loans and credit cards, as well as the interest rates you’re offered.

In this Tower Loan article, we explore the credit report definition to help you interpret this unique document and favorably position yourself to live comfortably with peace of mind.

What Is the Best Definition of a Credit Report? 

A credit report is a detailed summary of a person’s current credit status and credit activity. Your report includes payment histories, account information, and public record details.

Meanwhile, a credit history definition is a record of how you manage your debt over a period of time. It demonstrates your borrowing and repayment patterns across multiple accounts.

Also related, a credit score is a unique three-digit number that summarizes the information in your credit report. This number reflects your creditworthiness and indicates to lenders how likely you’ll be able to repay debt.

Below is a breakdown of the main sections that you’ll find as you learn how to read a credit report:

• Personal information
• Credit history
• Collections
• Public records
• Hard and soft credit inquiries
• Personal and consumer statements

Your Personal Information

A significant part of the credit report definition involves your personal details, including any name variations you have or aliases. This section also includes your social security number, date of birth, current and past addresses, phone numbers, and email addresses. You’ll typically find information about your current and past employers and any spouses or co-applicants you have had.

While reviewing this section, keep an eye out for any unfamiliar employers or addresses, name mix-ups, or typos. Any mistakes are red flags that could signal identity theft.

Your Credit History

What is credit history? This section of your credit report includes your revolving credit accounts, like credit cards and installment accounts, such as mortgages, auto loans, and student loans. Part of the credit history definition involves details about your lenders and creditors’ names, account opening dates, credit limits, and loan amounts.

Here you’ll also find payment histories of any late payments, monthly payments with current balances, and account responsibility information, such as whether your accounts are individual or joint. In this section, look for any unfamiliar accounts or inaccurate late payment records so that you can dispute them.

Your Accounts in Collections

When an account goes to collections, a creditor either sells your debt to a third-party collector or hires a collection agency to recover the debt. This situation usually occurs after you don’t pay a bill for several months. Accounts in collections can significantly damage your credit and result in frequent collections calls and letters until you repay the debt.

On your credit report, details appear about the name of your collection agencies, the original creditor, the date the account went to collections, and original and current balances. Part of understanding credit score and your credit report involves verifying if debts that appear are still owed and not already settled. Watch for any duplicate debt or invalid debt listings.

Public Records Information

Information available through public records shows up on a credit report, including any Chapter 7 and Chapter 13 bankruptcies, foreclosures, and repossessions. Chapter 7 details appear on a credit report for 10 years, and Chapter 13 details appear for seven years.

However, certain public records are not included on a credit report, such as tax liens, civil judgements, and minor legal infractions. Due to recent changes in the law, such information cannot be listed on credit reports and viewed by potential lenders.

While you review this section, though, look for any misattributed public records or outdated or incorrect information.

Your Credit Inquiries

Two types of inquiries appear on credit reports: hard inquiries and soft inquiries. Credit and loan applications trigger hard inquiries, which affect your credit score and stay on your credit report for two years. Credit monitoring, pre-approvals, and personal checks are soft inquiries that do not affect your credit score.

In this section of your credit report, make sure that you have authorized any hard inquiries that appear. If you notice unfamiliar hard inquiries, it could be a sign of identity theft. To minimize the impact of legitimate hard inquiries on your credit, time them strategically by grouping auto and mortgage loan applications within 30 to 45 days of each other.

Possibly Personal and Consumer Statements

You may have brief comments on your credit report in the form of personal or consumer statements. Personal statements usually just include your basic identification information and ensure that your credit report is accurately matched to you.

A consumer statement is an optional note that you can add to your own credit report. This may be relevant if you were a victim of identity theft, want to explain why a payment was late due to hardship, or why you disputed an inaccurate account. Your personal notes don’t have a direct impact on your credit score. Still, they give lenders and others viewing your report some helpful context about exceptional circumstances so they can make fair credit decisions.

How to Get and Monitor Your Credit Reports

Fortunately, you no longer have to wonder what a credit report is or how to obtain and review yours. AnnualCreditReport.com allows you to access your credit report for free each year. You can also get your credit report from the three credit bureaus’ websites: Experian, TransUnion, and Equifax.

Regularly reviewing your credit report is beneficial because it allows you to notice fraud early and track financial improvements for understanding credit score. You’ll also be more prepared for critical financial events, like taking out a new loan or mortgage, when you understand your credit report.

How to Dispute Credit Report Errors

Once you get familiar with how to read a credit report, you’ll be able to spot common errors, such as accounts that aren’t yours and duplicate accounts. Other errors may include mismatches in your name, address, and social security number, as well as incorrect late payment information.

When you notice an error, gather the supporting documents to dispute it and file a dispute with the appropriate bureau online, by phone, or by mail.

Regardless of the credit bureau, it can take up to 30 days for a dispute to be resolved.

Why Understanding How to Read a Credit Report Matters

Now that you understand the best definition of a credit report, we hope you’ll pay extra attention to maintaining your finances to improve your purchasing power and set yourself up for future success.

Your credit report matters because it helps improve and maintain your credit score while preventing long-term financial damage in the event of reporting errors or identity theft. By knowing how to read a credit report, you’ll be empowered to make smart borrowing and financial planning decisions for yourself and your family.

At Tower Loan, we use your credit report to make prequalification and loan application decisions, assessing your credit risk and offering you the best loan terms and interest rates possible.

You can check rates and apply for a loan on our website today, or stop by one of our convenient branch locations near you. By being a responsible borrower and making your loan payments on time each month, you can improve your credit and enjoy the benefits of a positive credit report in the future.